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Madras
High Court Quashes GST Demand Against Ohm Sakthi Blue Metals Due to One-Day
Delay in Filing GSTR-3B Amidst COVID-19
Case Summary: M/s. Ohm Sakthi Blue Metals vs. The Superintendent of
GST & Central Excise, Villupuram Range
Court: High
Court of Judicature at Madras
Case Number: W.P.No.19733
of 2024
Date of Order: 08.08.2024
Judge:
Hon'ble Mr. Justice Krishnan Ramasamy
Facts of the Case:
M/s. Ohm Sakthi Blue
Metals, represented by its proprietor Mr. K. Velmurugan, operates in Villupuram
District, Tamil Nadu. The company was issued a notice by the Superintendent of
GST & Central Excise, Villupuram Range, for the financial year 2019-2020.
This notice, dated 25.01.2024, raised a demand for tax amounting to ₹3,46,866/-
along with interest. The demand was triggered by a one-day delay in filing the
GSTR-3B for September 2020. The petitioner argued that the delay was an
inadvertent result of the disruptions caused by the COVID-19 pandemic, a
circumstance beyond their control. In response to the notice, the petitioner
filed objections on 19.02.2024, explaining the situation and contesting the
demand.
However, the respondent
was not persuaded by these explanations. On 22.03.2024, the respondent issued
Form GST DRC 01A, reiterating the same tax demand and instructing the
petitioner to pay the amount along with the applicable interest by 05.04.2024.
The respondent also warned that failure to comply would result in a show cause
notice under Section 73(1) of the GST Act, seeking the reversal of the Input
Tax Credit (ITC) claimed.
Subsequently, the
petitioner filed Writ Petition No.9811 of 2024, challenging the
constitutionality of Section 16(4) of the CGST/TNGST Act on the grounds that it
was manifestly arbitrary. This writ petition was still pending when the
respondent issued a show cause notice on 16.05.2024, followed by another notice
for a personal hearing scheduled for 26.06.2024. The petitioner responded with
a detailed reply on 29.06.2024, which was duly served on the respondent by
03.07.2024. Despite this, the respondent issued yet another notice on
04.07.2024, directing the petitioner to appear for a personal hearing on
15.07.2024 at 4:20 PM. Dissatisfied with the respondent's persistent actions,
the petitioner approached the High Court with the present writ petition to quash
the show cause notice dated 16.05.2024.
Petitioner's Submissions:
The petitioner,
represented by Senior Counsel Dr. A. Thiyagarajan, contended that the delay in
filing GSTR-3B for September 2020 was merely one day and was directly
attributable to the extraordinary circumstances posed by the COVID-19 pandemic.
The petitioner argued that such a minimal delay should not lead to such severe
consequences, particularly when the delay was not willful but caused by
unavoidable circumstances.
The petitioner further
argued that Section 16(4) of the CGST/TNGST Act, which prescribes a deadline
for claiming ITC, is procedural in nature and should be interpreted as
directory rather than mandatory. The petitioner emphasized that the provision
should not be applied in a rigid manner, especially under exceptional
circumstances like a global pandemic.
The petitioner also
pointed out that during its 53rd meeting on 22.06.2024, the GST Council
recommended an extension of the deadline for availing ITC on any invoice or
debit note under Section 16(4) of the CGST Act. This extension was to be
applied retrospectively for the financial years 2017-18, 2018-19, 2019-20, and
2020-21, with the new deadline being 30.11.2021. The GST Council also
recommended a retrospective amendment to Section 16(4), effective from
01.07.2017, to facilitate this extension. The petitioner argued that if this
proposed amendment were to come into effect, they would be entitled to the
statutory benefit under the amended law, rendering the show cause notice issued
by the respondent void.
In support of these
arguments, the petitioner relied on a previous order by the Madras High Court
in WP(MD) No.12218 of 2022 [Tvl. Vectra Computer Solutions vs. Commissioner of
Commercial Taxes and others], which dealt with similar issues regarding the interpretation
of procedural deadlines under the GST law.
Respondent's Submissions:
The respondent,
represented by Standing Counsel Mr. Rajendran Raghavan, argued that the demand
for tax was valid and in accordance with the provisions of the CGST/TNGST Act.
The respondent maintained that even a delay of one day in filing the GSTR-3B
return fell within the ambit of Section 16(4) of the Act, which is mandatory
and not merely procedural.
The respondent contended
that the petitioner was attempting to claim ITC beyond the statutory period,
which the law does not permit. The respondent insisted that the show cause
notice and subsequent proceedings were lawful and justified, and the petitioner's
arguments did not warrant any relief from the court.
Findings and Judgment:
Upon hearing the
arguments from both sides and reviewing the materials on record, the High Court
found that the petitioner's delay in filing the GSTR-3B return for September
2020 was indeed caused by the COVID-19 pandemic, a situation that disrupted
normal business operations across the country. The court acknowledged that the
delay was minimal—only one day—and considered the petitioner's explanation to
be reasonable.
The court also took note
of the GST Council's 53rd meeting recommendations, which extended the deadline
for availing ITC for several financial years, including the year in question,
and recommended a retrospective amendment to Section 16(4) of the CGST Act. The
court found that this recommendation, although not yet implemented, was
indicative of the need for a more flexible approach in interpreting the
procedural deadlines under the GST law.
Given these
considerations, the court concluded that the respondent's refusal to condone
the delay and the subsequent initiation of proceedings to reverse the ITC
claimed by the petitioner were detrimental to the petitioner's interests. The
court held that the respondent's actions were not only harsh but also legally
unsound, especially in light of the ongoing pandemic and the GST Council's
recommendations.
Conclusion: The
High Court quashed the show cause notice dated 16.05.2024 issued by the
Superintendent of GST & Central Excise, Villupuram Range, and allowed the
writ petition filed by M/s. Ohm Sakthi Blue Metals. The court ordered that the
proceedings initiated against the petitioner be set aside, and no costs were
awarded. The connected miscellaneous petition was also closed.
Disclaimer: All the Information is based on the notification, circular and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.
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